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Pantry Announces Record Q3 Results

More than 40 percent increase in revenue attributed to gasoline and acquisitions.

July 27, 2006, 08:00 pm

SANFORD, N.C. -- The Pantry, operator of nearly 1,500 stores in the Southeastern U.S., reported total revenues of $1.6 billion for the third quarter of 2006. This represents a 41 percent increase from last year. Net income rose 22.2 percent to $20.3 million for the quarter.

"These record results reflect our continued solid execution of the basics at the store level, the impact of successful acquisitions over the past year, and a favorable industry environment in the gasoline business," said chairman and CEO Peter J. Sodini.

During the third quarter, The Pantry completed the acquisition of Shop-A-Snak Food Mart Inc., operator of 38 stores in Alabama. Six additional stores in North Carolina under the Fuel Mate banner are slated to be acquired by The Pantry, along with two stores in Florida and one in Mississippi.

If these stores are acquired by the end of fiscal 2006, The Pantry will have exceeded its 96 acquisitions from last year, bringing the total acquisitions for fiscal 2006 to 111. The Pantry also expects to open seven large-format stores in fiscal 2006. "You will get a pretty good sign of what a store is going to do after the first 60 days. … New stores have almost 1.5 times volume of an average store. … Sometimes double what the average store would be in volume and with profits," Sodini said at the company's conference call with investors yesterday.

Gasoline gross profits for the company in the third quarter totaled $64.8 million, a 33.7 percent increase from last year's third quarter. Gross margin for gasoline was 14 cents, compared to 12.3 cents for last year's gross margin. Gallons sold by stores rose 16.8 percent overall, resulting in a 51.1 percent gain in gasoline revenues.

When asked about The Pantry's potential involvement in the emerging E85 fuel business at the company's conference call, Sodini said "We will see if that is much of a reality. I don't think it is much of a solution to the supply crisis for energy. … we don't look at E85 as much of an option, maybe in selected location here or there." He added that with E85's low mileage per gallon, approximately 22 percent lower per gallon than regular gasoline, "I don’t know how you sell that."

"Our results continue to benefit from the re-branding of most of our stores under the Kangaroo Express banner over the last few years, the ongoing fine-tuning of our merchandise offerings to meet consumers' convenience needs, and our focus on higher-margin opportunities in food service and private label products," he said.

Merchandise revenues increased 14.8 percent overall for the quarter and 5.8 percent on a comparable store basis. Total gross profits for merchandise was $139.1 million, up 17.3 percent for the quarter, contributing 68 percent of the company's total gross profits.

"While year-to-year comparisons for our gasoline operations can be challenging, we will remain focused primarily on our strategies for driving the Company's long-term growth and returns to shareholders," Sodini said in a written statement.

Based in Sanford, N.C., The Pantry totaled $4.4 billion in net sales for fiscal 2005. The company independently operates it stores throughout 11 states, primarily under the Kangaroo Express banner.